Best Projects on Arbitrum to Invest in 2024

5 Best Projects on Arbitrum

Our analysts have evaluated the top-performing projects on Arbitrum, focusing on innovation, investment potential, total value locked (TVL), and unique functionalities. After a thorough review, we've identified the five best protocols driving Arbitrum's growth in 2024 by enhancing liquidity solutions, optimizing cross-chain interactions, and pushing the boundaries in decentralized perpetual trading.

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1. GMX (GMX)

GMX has earned its place as one of Arbitrum's top decentralized perpetual exchanges, serving over 660,000 users in late 2024. Traders can leverage up to 100x on its platform, with liquidity managed through the GLP token. While staking GMX rewards users in ETH and AVAX, it's the deep liquidity on Arbitrum that keeps this exchange competitive and popular.

With $175 billion in cumulative trading volume, GMX is now facing pressure from up-and-comers like Vertex and MYX Finance. After its newest update, GMX will allow users to switch liquidity between multiple pools using the SHIFT feature, optimizing capital allocation to the most utilized GM markets without incurring any transaction fees thanks to the GMX Liquidity Vaults (GLV).

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2. Merkl

Merkl by Angle Labs has become an integral part of Arbitrum’s DeFi, facilitating efficient reward distribution across multiple protocols. It supports a range of incentives like liquidity mining and airdrops, collaborating with platforms such as Uniswap and Radiant. Currently, Merkl manages 111 pools on Arbitrum, with $217 billion in total value locked and APYs reaching up to 90%.

Its innovative merkle tree system allows users to claim rewards from multiple campaigns in one transaction, providing lucrative rewards for liquidity providers seeking efficiency and high yields. Furthermore, Merkl supports cross-chain reward campaigns, allowing protocols to distribute incentives across multiple networks beyond Arbitrum like Base and Polygon.

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3. Camelot (GRAIL)

Camelot is a decentralized exchange built specifically for Arbitrum that uses a dual AMM system to handle both volatile and stable assets. Liquidity providers can lock in assets as spNFTs to earn boosted yields, while Nitro pools give projects flexibility in setting liquidity incentives. With 230 pools and $98 million in TVL, Camelot offers practicality at around 7.12% average APY.

Camelot’s dual-token system consists of GRAIL and xGRAIL, ensuring liquidity incentives and governance alignment. Its recent success with the GU project—launched through its Orbital Accelerator launchpad—shows Camelot’s potential to support new projects while maintaining sustainable liquidity incentives for users in the Arbitrum ecosystem.

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4. Hyperliquid

Hyperliquid is a decentralized perpetual exchange that stands out by operating on its own Layer 1 blockchain, optimized for high-frequency trading. It can process up to 100,000 transactions per second with 50x leverage, drawing in serious traders. The platform integrates with Arbitrum for cross-chain liquidity transfers, as traders need to bridge USDC from the Layer 2.

Hyperliquid's vaults and points-based rewards program add further depth to its offerings, now used by 200,000 users. Hyperliquid’s consensus algorithm, HyperBFT, is specifically designed to maintain high throughput with low latency, ensuring seamless trading even during market spikes. Hyperliquid is still a compelling investment on Arbitrum heading into Q4 2024.

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5. Aave V3 (AAVE)

Aave V3, fully integrated on Arbitrum, brings its decentralized lending and borrowing protocol to the Layer 2, almost monopolizing the sector. While not native to Arbitrum, Aave benefits from the lower transaction fees and improved speed on the network. The protocol introduces isolation mode for safer onboarding of new assets, and its TVL has surpassed $1 billion.

Aave consistently outperforms Arbitrum-native lending protocols like Radiant in both TVL and APYs, making it a reliable option for users looking to optimize their lending strategies while leveraging the scalability of Arbitrum. Interestingly, Aave V3 on Arbitrum offers users the ability to isolate volatile or experimental assets, minimizing systemic risk in lending pools.

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What is Arbitrum?

Arbitrum is a leading Ethereum Layer 2 scaling solution, designed to enhance the performance of Ethereum by reducing gas fees and improving transaction throughput. It achieves this through innovations like Arbitrum Rollup, AnyTrust, and Orbit, which allow developers to build Layer 3s or appchains.

Arbitrum processes transactions off-chain and batches them onto Ethereum for finality, maintaining Ethereum’s security while offering significant cost savings. As a "Stage 1" optimistic rollup, it is moving toward decentralization with external fraud proofs and limited oversight from a Security Council.

Vitalik Buterin has referred to Arbitrum as entering the "Stage 1+" phase, where Layer 2s are not just about scalability but are beginning to drive mainstream adoption of decentralized finance.

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How Many Projects Are on Arbitrum?

Arbitrum currently hosts 702 projects with a combined total value locked of $5 billion, making it the largest Ethereum Layer 2 and the fifth-largest blockchain overall.

The top 100 projects alone account for $3.1 billion with leading categories including derivatives, lending, and yield protocols, which make up 13%, 17%, and 11% of the TVL, respectively. Decentralized exchanges are also key on Arbitrum, with the top 9 DEXs locking $488 million, including protocols like Uniswap cross-chaining their liquidity onto the network.

However, some projects, such as TreasureDAO, the former top NFT protocol on the blockchain, are migrating to ZKsync due to slower progress in gaming support on Arbitrum.

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Is Arbitrum a Good Project?

As an investment asset, the Arbitrum ARB token has crashed by 67% since the beginning of 2024, while the average ROI of the top 50 coins available is -14.80% for the year.

Yet, Arbitrum is a strong contender in the Layer 2 space, thanks to its ability to scale Ethereum while keeping fees low and security intact. It's popular among developers because it integrates seamlessly with Ethereum, offering the best of both worlds—scalability and security. Beyond just being technically sound, Arbitrum has a thriving ecosystem with projects like GMX, Merkl and Camelot.

Additionally, well-established protocols like AAVE, Uniswap, and Compound have found solid footing on Arbitrum, bringing their large user bases and liquidity to the network. What sets Arbitrum apart is its community-driven growth and support for DeFi innovators, making it a go-to platform for investors looking to back promising EVM-based projects on a scalable network.

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Bottom Line

Arbitrum continues to lead the Layer 2 space with its low fees and scalability, driving innovation across DeFi. Projects like GMX, Merkl, Camelot, Hyperliquid, and Aave V3 are all using Arbitrum’s strengths to push DeFi forward, whether it’s improving liquidity, boosting cross-chain interactions, or offering solid yields.

These protocols show why Arbitrum remains a top choice for developers and investors looking to get involved in the next phase of Ethereum’s growth.